Capital idea

28 April 2020 By Liam Proud Follow @liamwardproud

The UK mega-bank is well-capitalised despite a 48% slump in pre-tax profit and five-fold rise in bad-debt provisions. That’s partly because regulators told CEO Noel Quinn to halt payouts. It’s an opportune moment to link them to earnings and provide flexibility in future crises.

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HSBC on April 28 reported pre-tax profit of $3.2 billion for the first three months of 2020, 48% less than in the same period a year earlier, and it warned that the pandemic could cause further damage.

Revenue fell 5% year-on-year to $13.7 billion, while provisions for credit losses increased five-fold to $3 billion. The London-listed lender’s common equity Tier 1 capital ratio was 14.6% compared with 14.7% at the end of 2019.

HSBC increased its credit impairment charges to $3 billion from $600 million and said the coronavirus could push its full-year provisions for loan losses to between $7 billion and $11 billion.

At the behest of the Bank of England, HSBC on March 31 cancelled a planned dividend of $0.21 per share due to be paid on April 14. The lender said on April 28 that it would “review our dividend policy at, or ahead of, our year-end results for 2020".

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